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CIRCULAR No

CIRCULAR No.5/1997/TT-NHNN17 OF OCTOBER 25, 1997 GUIDING THE CONVERSION AND REGISTRATION OF THE PEOPLE'S CREDIT FUNDS AND CREDIT COOPERATIVES UNDER DECREE No.16-CP OF FEBRUARY 21, 1997 OF THE GOVERNMENT

On February 21, 1997 the Government promulgated Decree No.16-CP on the conversion and registration of cooperatives and organization of operations of the Union of Cooperatives; the State Bank hereby provides the following guidance for the implementation of a number of concrete points:

A. GENERAL PROVISIONS

1. Subject to this Circular are:

a/ Grassroots People's Credit Funds (PCFs) established and operating under Decision No.390-TTg of July 27, 1993 of the Prime Minister on the experimental establishment of the People's Credit Fund.

b/ Credit Cooperatives (CCs) which have been granted operation licenses under the Ordinance on Banks, Credit Cooperatives and Financial Companies.

2. The Central People's Credit Fund (CPCF) and the regional People's Credit Funds (RPCF) are associate organizations, to ensure safety for the operation of the system of PCFs and, therefore, shall not be subject to conversion.

3. PCFs which have a statutory ital lower than the minimum prescribed level and fail to meet other conditions shall, during the conversion period, have to work out plans for raising their statutory ital to the prescribed level and meeting other prescribed conditions within a given period of time, then submit them to the provincial/municipal steering committees for the conversion of cooperatives for consideration and approval.

4. The PCFs and CCs shall not be converted under the Law on Cooperatives in the following cases:

- The members' Congress decides to dissolve it of their own accord;

- They are forced to be dissolved for serious violations of law or because of prolonged losses which are past recovery.

B. CONTENTS AND ORDER OF CONVERSION

I. ESTABLISHMENT OF THE PREPARATORY COMMITTEE FOR CONVERSION:

1. The preparatory committee for conversion of a PCF or CC shall include a head who is the President of the Managing Board and other members who are chief controller, Executive Director, a representative of the Fund's or Cooperative's members and a representative of the local authority.

The establishment of the preparatory committee for the conversion of a PCF or CC shall be decided by the district steering committee for the conversion of cooperatives.

2. The preparatory committee for the conversion of a PCF or CC shall cease its operation after fulfilling the conversion, re-registration or dissolution procedures.

II. TASKS OF THE PREPARATORY COMMITTEE FOR CONVERSION:

The preparatory committee for conversion of a PCF or CC shall have the following tasks:

1. To popularize and explain the objectives, significance, contents and requirements of the PCF's or CC's conversion so that it may operate in accordance with the Law on Cooperatives.

2. To inventory and evaluate all assets and ital in comparison with the balance sheet, the copies of inventories and other related documents. After checking the accuracy of data, certifying the origins of assets and classifying them, the loans and debts of the PCF or CC, to propose solutions for handling the assets and ital to be submitted to the members' Congress for consideration.

3. Basing itself on the Law on Cooperatives, the Ordinance on Banks, Credit Cooperatives and Financial Companies and the Model Statute of the People's Credit Fund to elaborate a new statute and work out the plan of operation;

4. With regard to a PCF or CC operating in an inter-ward or inter-communal area, the preparatory committee for conversion shall have to re-determine the scope of its operation in accordance with Decree No.42-CP of April 29, 1997 of the Government.

5. To convene the members' Congress (or Congress of the members' delegates) to decide the conversion or dissolution of the PCF or CC. For a PCF, its conversion shall be decided by the annual Congress.

III. ORGANIZATION OF THE MEMBERS' CONGRESS:

1. For a PCF: If the members' Congress decides the conversion and business registration of the PCF according to the Law on Cooperatives, it shall have to pass the following contents:

a/ The resolution on the conversion of the PCF and its business registration in accordance with the Law on Cooperatives;

b/ The new statute conforming with the Model Statute;

c/ The plan for handling the ital and assets and other issues;

d/ The plan of operation of the PCF in the coming period;

e/ The election of the Managing Board and President of the Managing Board, the Control Commission and the Executive Director, at the end of their term; or additional election, replacement of members of the Managing Board, the President of the Managing Board, the Control Commission or the Executive Director, pending the expiry of its term.

2. For a CC: If the Congress of members of the cooperative decides to convert the Cooperative into a People's Credit Fund, it shall have to approve the following contents:

a/ The resolution on the conversion of the CC into a PCF which shall operate under the Law on Cooperatives;

b/ The membership of the PCF;

c/ The name and emblem of the PCF;

d/ The statute and operational regulations of the PCF;

e/ The amount of its statutory ital, certifying ital and regular ital;

f/ The plan of operation;

g/ The election of the Managing Board, the President of the Managing Board, the Control Commission and the Executive Director of the PCF;

h/ The plan for handling the ital and assets of the Credit Cooperative:

When approving the plan for the ital and assets of the Credit Cooperative, attention should focus on the following:

- The loans: it is necessary to classify the recoverable and unrecoverable loans, determine the reasons as well as responsibilities therefor. More concretely:

+ For recoverable loans, it is necessary to calculate them, collect interests thereon up to the time of conversion, and make new loan agreements.

+ For loans and other sources of revenue which cannot be recovered due to objective causes and the existing losses, they must be reported to the Congress of cooperative members for resolution to deduct the indivisible funds to cover. If such deduction is not enough, deduction from the members' ital contributions is required.

+ For loans and other sources of revenue which cannot be recovered due to subjective causes, it is necessary to determine the responsibility for such loans and request the concerned people to pay compensation as prescribed.

- For deposits of citizens and organizations, it is necessary to calculate and pay interests to the depositors, and change the depositors' books.

- For indivisible ital and funds, after deducting losses (if any), they shall be wholly transferred to the PCF.

As for ital contributed by members of the old Credit Cooperative: after deducting losses (if any), it shall be turned into certifying ital and regular ital of members of the PCF, who shall have to contribute enough ital as prescribed by the PCF's statute.

- For fixed assets and other types of asset, they shall be re-evaluated and classified, handled according to the plan adopted by the Congress of cooperative members and handed over to the PCF for continued management and use.

3. For those PCFs and CCs which are not allowed to be converted, the preparatory committee for conversion shall submit a plan to the Congress for handling the ital, assets, loans and debts:

- For loans and debts:

+ To recover all loans (including interests) and other revenues;

+ To pay all debts: deposits and borrowings (including interests to be paid) and other spendings.

- Losses (if any) shall be settled in the following order:

+ Deduction from indivisible funds;

+ Deduction from contributed ital;

+ Deduction from the money collected from the liquidation of assets.

- Publicly supported ital and assets shall be handed over to the local authority.

- After settling loans and debts, fulfilling all obligations towards the State and paying dissolution costs, the remaining ital and funds shall be divided among members of the PCF or CC according to their contributions thereto. The plan of division shall be decided by the members' Congress.

- In cases where the value of the remaining assets, ital and funds fail to cover the debts, the procedures on bankruptcy of enterprises shall apply.

C. REGISTRATION OF OPERATION AND BUSINESS

I. REGISTRATION OF OPERATION:

1. A PCF which has been granted operation license by the State Bank, when being converted under the Law on Cooperatives, shall not have to fill procedures for a new operation license but shall have to obtain permission from the State Bank for the application of its operational statute and ratification of the list of members of the Managing Board, the Control Commission and the Executive Director. The PCF shall have to submit to the State Bank the following documents:

- The minutes of the members' Congress that approves the conversion;

- The PCF statute which has been adopted by the members' Congress;

- The plan to handle the ital and assets;

- The plan of operation of the PCF;

- The list and curricula vitae of the members of the Managing Board, the Control Commission and the Executive Director.

2. A Credit Cooperative to be converted into a PCF operating under the Law on Cooperatives shall have to submit to the State Bank:

- The minutes of the Congress of cooperative members that approves the conversion;

- The application for an operation license;

- The PCF's statute which has been adopted by the members' Congress;

- The list and curricula vitae of the members of the Managing Board, the Control Commission and the Executive Director;

- The plan of operation for the first years and the long-term plan;

- The list of registering members and their respective ital contributions;

- The certificate granted by the commune/ward People's Committee on the ownership right over or the right to use the PCF's head office;

- The plan for settlement of the remaining problems of the old Credit Cooperative.

II. BUSINESS REGISTRATION:

The PCFs and CCs, which have completed procedures for conversion under the Law on Cooperatives and have been granted operation licenses by the State Bank shall compile dossiers to be submitted to the provincial/municipal Planning and Investment Service so that the latter may submit them to the provincial/municipal People's Committee for granting business registration certificates. Such a dossier shall include:

- The application for business registration certificate attached with the approved minutes of the members' Congress;

- The operation license granted by the State Bank;

- The statute already adopted by the members' Congress (two copies);

- The list and personal resumes of the members of the Managing Board, the Control Commission and the Executive Director;

- The list of the registering members and their respective ital contributions;

- The plan of operation of the PCF;

- The certificate granted by the communal People's Committee on the ownership right over or the right to use the PCF's head office.

D. ORGANIZATION OF IMPLEMENTATION

1. This Circular takes effect 15 days after its signing. The earlier provisions which are contrary to this Circular shall cease to be effective.

2. The PCFs which have been established under Decree No.42-CP of April 29, 1997 of the Government after the effective time-limit of this Circular shall be exempt from filling conversion procedures.

3. The PCFs and CCs shall conduct the conversion according to the time-limit prescribed by the Government.

The CCs converted into PCFs under the Law on Cooperatives shall have to renew all books and documents according to the forms provided for the PCF.

4. The Head of the State Bank Governor's Office, the Head of the Department for the Management of People's Credit Organizations and the heads of the relevant units attached to the central State Bank, the directors of the State Bank's branches in provinces and cities, the Presidents of the Managing Boards of the PCFs and CCs shall have to organize the strict implementation of this Circular.

5. The directors of the State Bank's branches in provinces and cities shall have to report to the provincial/municipal People's Committees on the contents of this Circular and submit the plans of conversion and registration of the PCFs in their respective localities.

In the course of implementation, any arising problem shall be promptly reported to the Central State Bank for settlement.

For the Governor of the State Bank

Deputy Governor

LE DUC THUY